Q&A with David Goldwyn: Will Maduro’s Electioneering Decrease Appetite for Guyanese Oil?

On December 3, President Nicolás Maduro held a referendum asking citizens whether the Essequibo region should be “reclaimed” as part of Venezuelan territory. Whether prompted by the 2015 discovery of abundant oil reserves, or the need to gain popularity before the 2024 presidential elections, Maduro ordered Petróleos de Venezuela, SA (PDVSA) to start exploration in the area. Given these developments, the Inter-American Dialogue spoke with expert David Goldwyn, president of Goldwyn Global Strategies, LLC, an international energy advisory consultancy, to explore implications for the oil sector.

Inter-American Dialogue: How do you think this political development will affect oil production and exploration in Guyana? Do these developments affect investor enthusiasm for Guyanese oil?  

David Goldwyn: Venezuela’s aggressive and dubious assertion of a right to the Essequibo region of Guyana is a transparent political ploy designed to rally support for Maduro in the 2024 elections and distract the national population from the poor state of the economy.  The national referendum, which mustered an impressively low turnout, and subsequent ploy to offer Venezuelan identification to Guyanese citizens in the Essequibo region are all part of the clever campaign to muster nationalist passion in the run up to the election. The Maduro regime has made these choices rather than focusing on restoration of democracy and the opportunity that compliance with the recent Barbados agreement would provide to allow investment to return to the country. For now, all this seems like saber-rattling. It is unlikely that these actions will have an impact on oil exploration and development for now. The United States has strongly supported Guyana’s right to explore its own waters. Brazil, the UK, and the Organization of American States (OAS) have made their positions clear.  However, if Venezuela were to take any action to physically impair exploration or production, that could change.

IAD: Should Maduro materially advance Venezuela’s claim to the region, should we expect sanctions from the US, European Union, United Kingdom, or others? If yes, how do you analyze Maduro’s insistence on claiming the region’s oil wealth given the threat of sanctions from major oil consumers should he attempt to seize it?  Is it mostly an attempt to incite nationalism ahead of the 2024 elections?

DG: International law strongly favors the Guyanese position. The International Court of Justice (ICJ) has ordered that Venezuela take no action while the claim is before the court. If Venezuela were to attack Guyana, and militarily attempt to seize territory, I would imagine that it would face “Iran-style” sanctions. I would expect, for example, a full economic embargo, and denial of Venezuelan access to the US dollar. Brazil and the OAS have already made their support for Guyana clear, and I would expect that Venezuela would face multilateral sanctions of the most severe kind. This would of course completely undermine Venezuela’s recent attempt to re-engage with the international community, resume trade, and revive investment in the country. There would be no swifter path to extinguish that strategy than by an unprovoked attack against Guyana. That is why most analysts believe this is electioneering rather than a serious claim.

IAD: What sort of a response should we expect from Russia, given its relationship with Venezuela and own ongoing territorial conflict?  What sort of response should we expect from China, the largest consumer of Venezuelan oil? 

DG: Russia’s relationship with Venezuela is primarily designed as an irritant to the United States. Russia has no particular need for Venezuela’s quality of crude and the investment of Russian companies in the Venezuelan upstream is largely to create a political foothold. China, on the other hand, is a primary consumer of heavy crude, and has legitimate fiscal interests in Venezuela, both repayment of debt owed to it, and a desire to access a long-term supply of low-cost crude oil. China has not recognized US sanctions designed to restore democracy in Venezuela, but support for Venezuela in the face of an unprovoked cross-border aggression might be another matter. I would imagine they would attempt to remain neutral, encourage a peaceful resolution, but continue to purchase Venezuelan crude despite multilateral sanctions.

IAD: Essequibo is sparsely populated and holds one of the world’s last four pristine rainforests. Regardless of political control, should we expect accelerated environmental degradation given both the region’s illegal mining problem and oil prospects?  Would a Guyanese administration offer more environmental protection for the region? 

DG: Guyana’s national development plans are still evolving.  The government has plans for distributed electricity generation in the region, and for the build out of the road system. The indigenous populations of the region, while small, are significant in Guyana’s tightly contested electoral system. There has been a history of illegal gold and diamond mining, and the region is also rich in mineral resources. Guyana’s environmental protection plans are still quite nascent.  While the government has expressed appreciation for the importance of pristine rainforests for ecotourism, it is still unclear what areas will be off-limits to development and how the government will manage the development it chooses to pursue.